{"id":1781,"date":"2022-07-13T13:54:01","date_gmt":"2022-07-13T20:54:01","guid":{"rendered":"https:\/\/contractorslicensingschools.com\/blog\/?p=1781"},"modified":"2022-07-18T13:59:41","modified_gmt":"2022-07-18T20:59:41","slug":"how-to-save-for-retirement-while-running-a-contracting-business","status":"publish","type":"post","link":"https:\/\/contractorslicensingschools.com\/blog\/how-to-save-for-retirement-while-running-a-contracting-business\/","title":{"rendered":"How to Save for Retirement While Running a Contracting Business"},"content":{"rendered":"<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/contractorslicensingschools.com\/blog\/wp-content\/uploads\/2022\/07\/shutterstock_793237669.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-1785\" src=\"https:\/\/contractorslicensingschools.com\/blog\/wp-content\/uploads\/2022\/07\/shutterstock_793237669.jpg\" alt=\"\" width=\"1000\" height=\"667\" srcset=\"https:\/\/contractorslicensingschools.com\/blog\/wp-content\/uploads\/2022\/07\/shutterstock_793237669.jpg 1000w, https:\/\/contractorslicensingschools.com\/blog\/wp-content\/uploads\/2022\/07\/shutterstock_793237669-300x200.jpg 300w, https:\/\/contractorslicensingschools.com\/blog\/wp-content\/uploads\/2022\/07\/shutterstock_793237669-768x512.jpg 768w, https:\/\/contractorslicensingschools.com\/blog\/wp-content\/uploads\/2022\/07\/shutterstock_793237669-624x416.jpg 624w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\" \/><\/a>When you work for a company, you might have options to save for retirement that come with the job. As a business owner, you have different choices to make. Here are a few things you should know about saving for retirement as a contractor.<\/span><\/p>\n<p><b>Types of Retirement Savings Accounts<br \/>\n<\/b><span style=\"font-weight: 400;\">There are a few types of retirement savings accounts that you should understand. They have several differences, so you should be able to distinguish them before you make a choice. These include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">401(k)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">IRA<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Roth IRA<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">A 401(k) is an employer-sponsored retirement plan. It is possible to open a 401(k), even if you are a sole proprietor. Business owners might gravitate toward an IRA, which tends to cost less to set up and maintain. An IRA is an independent retirement account that people can contribute to, and most people can deduct the contribution from their federal taxes. You pay taxes as you take withdrawals. A Roth IRA offers a similar investment vehicle, but the taxation is different. People can\u2019t claim Roth IRA contributions on their taxes, but they generally don\u2019t have to pay taxes on the withdrawals.<\/span><\/p>\n<p><b>Contribution Limits<br \/>\n<\/b><span style=\"font-weight: 400;\">For each type of retirement account, there are specific contribution limits that mostly depend on age. A 401(k) usually offers the highest limits. For 2022, people under age 50 can contribute up to $20,500 of their salary. After age 50, they can contribute an additional $6,500. For a traditional IRA, you can only contribute $6,000 per year, or $7,000 per year if you\u2019re over 50. A Roth IRA has similar limits, but there are a few more restrictions. Specifically, the ability to contribute to a Roth IRA phases out at higher incomes.<\/span><\/p>\n<p><b>How to Diversify<br \/>\n<\/b><span style=\"font-weight: 400;\">Diversification of your retirement plan is an important way to minimize your level of risk. People who put all of their retirement savings into one account may have a higher level of risk, especially if they aren\u2019t investing in something that spreads out the risk like a mutual fund. It\u2019s better to have more than one account or investments in multiple arenas, just in case one of them ends up losing a lot of money. It\u2019s wise to consult a financial advisor, particularly if you don\u2019t have much experience with investing. They can help you evaluate your retirement goals and diversify your portfolio in a way that helps you achieve them.<\/span><\/p>\n<p><b>Importance of Compound Interest<br \/>\n<\/b><span style=\"font-weight: 400;\">The reason many financial experts recommend that you start saving as soon as you can is the benefit of compound interest. Most savings vehicles allow you to compound the interest that you earn, which increases your principal over time. For example, take an investment of $10,000 that increases in value by 5% each year. After the first year, you\u2019re calculating the increase based on $10,500, not $10,000. As you continue to make contributions, the value of your investment grows both ways. Over a period of decades, you can turn a relatively small investment into something that you can live off of during retirement.<\/span><\/p>\n<p><b>Increasing Contributions Over Time<br \/>\n<\/b><span style=\"font-weight: 400;\">For most people, the amount of money that you\u2019re willing and able to save goes up over time. Inflation changes the value of necessary items like housing, medicine or food. You don\u2019t want to be caught saving too little because your original plans were based on a cost of living that doesn\u2019t make sense anymore. Instead, get in the habit of saving, and make periodic increases when possible. You might not be able to contribute the maximum right now, but you can always work toward it. This is particularly important for contractors who can\u2019t start saving early in their careers. Adding more at the end might not give you as much compound interest, but it will still help.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Saving for retirement may be more complicated as a contractor, but there are ways that you can start working on it now. For more information on what you\u2019ll need to be a successful business owner, contact CSLS today!<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When you work for a company, you might have options to save for retirement that come with the job. As a business owner, you have different choices to make. Here are a few things you should know about saving for retirement as a contractor. Types of Retirement Savings Accounts There are a few types of &#8230; <a title=\"How to Save for Retirement While Running a Contracting Business\" class=\"read-more\" href=\"https:\/\/contractorslicensingschools.com\/blog\/how-to-save-for-retirement-while-running-a-contracting-business\/\" aria-label=\"Read more about How to Save for Retirement While Running a Contracting Business\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[220],"tags":[],"class_list":["post-1781","post","type-post","status-publish","format-standard","hentry","category-contractor-business"],"_links":{"self":[{"href":"https:\/\/contractorslicensingschools.com\/blog\/wp-json\/wp\/v2\/posts\/1781","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/contractorslicensingschools.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/contractorslicensingschools.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/contractorslicensingschools.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/contractorslicensingschools.com\/blog\/wp-json\/wp\/v2\/comments?post=1781"}],"version-history":[{"count":0,"href":"https:\/\/contractorslicensingschools.com\/blog\/wp-json\/wp\/v2\/posts\/1781\/revisions"}],"wp:attachment":[{"href":"https:\/\/contractorslicensingschools.com\/blog\/wp-json\/wp\/v2\/media?parent=1781"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/contractorslicensingschools.com\/blog\/wp-json\/wp\/v2\/categories?post=1781"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/contractorslicensingschools.com\/blog\/wp-json\/wp\/v2\/tags?post=1781"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}